As gaming consoles become increasingly expensive to manufacture, companies like Sony, Nintendo, and Microsoft walk into the ring knowing they are going to take a big hit before they walk away with the gold. Some industry insiders put manufacturing costs of the Xbox 360 (MSRP $399) at as high as $700. That would mean Microsoft would be in the red for an entire year before they even started making a profit.
Microsoft may be able to recoup some of its manufacturing expenses for the Xbox 360, though. Last month it signed an agreement with Milpitas-Calif.-based Chartered Semiconductor to manufacture the gaming console’s CPU using a 65-nm Silicon-on-Insulator (SOI) fabrication process. "It’s standard practice in the semiconductor industry to reduce transistor sizes every few years to be able to place more CPUs on a wafer," said Melissa Wilson, a spokesperson for Microsoft. "Doing so results in higher CPU yields, and higher yields lead to lower manufacturing costs."
The Xbox 360 CPU is based on a single chip with three processor cores that each contain 32 kbytes of data and instruction Level 1 cache. IBM and Chartered Semiconductor have been manufacturing the CPU using IBM’s 90-nm CMOS Silicon-on-Insulator (SOI) semiconductor technology since IBM and Microsoft finalized specifications for the game console last year.
Wilson said that an added benefit of moving to a smaller transistor size is the resulting decrease in heat dissipation, but said the primary reason for moving to the 65-nm process over time is to reduce manufacturing costs.
Sony’s Playstation 3, which is expected to debut worldwide this November, has been estimated to cost as much as $900 to manufacture, and to retail for as little as $499. But before the next Playstation even hits store shelves, Sony is looking for ways to minimize that gap.
"After the introduction of the PS3 we will focus our efforts on expanding the platform as rapidly as possible," said Nobuyuki Oneda, Sony’s chief financial officer, at a Tokyo news conference to announce the company’s annual fiscal earnings last month. "We will also attempt to lower the manufacturing costs by reducing the number of parts used in hardware and reducing the costs of the semiconductors and other key components. By so doing, we aim to bring the PS3 business to profitability at the earliest possible time."
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